Site Search Navigation

Site Navigation

Site Mobile Navigation

Netflix, Comcast and Net Neutrality

By Vikas Bajaj February 24, 2014 2:28 pmFebruary 24, 2014 2:28 pm

A deal announced Sunday between Comcast, the nation’s largest cable and broadband company, and Netflix, the popular video streaming service, raises several troubling questions about the future of the Internet. Under the agreement, Netflix will hook its servers directly to Comcast’s network for an undisclosed fee, cutting out the middlemen that previously connected the companies together.

The companies claim the deal will not give Netflix “preferential network treatment.” In other words, they are saying that it will not violate what is popularly known as “net neutrality:” the principle that broadband companies should treat all Internet data equally, without blocking or discriminating against certain types of content.

But it’s hard to imagine that Netflix would strike a deal with Comcast if it didn’t get something of value in return. The big question is what did it get and how will that affect other companies on the Internet?
Unfortunately, it’s hard to answer that question because the companies have disclosed little about their agreement – their joint statement was just two paragraphs long. That is why Federal Communications Commission and the antitrust division of the Department of Justice should ask the companies to provide more details.

At first glance, a deal between Comcast and Netflix may seem like a good thing – especially to people who subscribe to the services of both companies. In recent weeks, some consumers with broadband connections from Comcast and Verizon have complained that their Netflix service has slowed down considerably. This deal will likely put an end to that frustrating experience for Comcast subscribers.

But regulators need to take a longer view. Most American homes have access to just one or two broadband providers: their cable or phone companies. That makes these businesses important gatekeepers with tremendous power over consumers and Internet firms like Netflix. Recently, Comcast announced its intentions to become even bigger by buying the country’s second-biggest cable company, Time Warner Cable, in deal that would give it control over one-third of all broadband subscribers.

Netflix, which is growing fast and by some estimates accounts for 30 percent of all Internet traffic, may have the financial resources to cut deals with Comcast, Verizon and other broadband providers. But smaller companies or startups could find it difficult to compete if they, too, have to pay cable and phone companies for direct access to their networks.

Even Netflix might come to regret its deal if Comcast and other broadband providers substantially raise prices for such direct connections in the future. Netflix will find it hard to push back against big increases because there are just a few competitors who can deliver its video streams to consumers.

Governments historically addressed concerns about the monopoly power of telephone companies and other utility businesses through what is known as “common carrier” regulations. These rules prohibit companies from engaging in “unjust or unreasonable discrimination.” During the Bush administration, the F.C.C. decided broadband would not be classified as a common carrier and that has not changed in the Obama administration. The Comcast-Netflix deal should give the F.C.C. another reason to revisit its decision.